THE COMPANY AND BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

THE COMPANY AND BASIS OF PRESENTATION

THE COMPANY AND BASIS OF PRESENTATION

Description of Business

Diversey Holdings, Ltd. (hereafter the "Company", “we”, “us”, and “our”) is a leading global provider of high-performance hygiene, infection prevention and cleaning solutions. We develop mission-critical products, services and technologies that save lives and protect our environment. We were formed as an exempted company incorporated under the laws of the Cayman Islands with limited liability on November 3, 2020 for the purpose of completing an initial public offering of our ordinary shares and related transactions and in order to carry on the business of our indirect wholly-owned operating subsidiaries.

Take-Private Merger Agreement

On March 8, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Olympus Water Holdings IV, L.P., a Cayman Islands exempted limited partnership (“Parent”), acting by its General Partner, Olympus Water Holdings Limited, a Cayman Islands exempted company incorporated with limited liability, and Diamond Merger Limited, a Cayman Islands exempted company and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into us (the “Merger”), with us continuing as the surviving company as a wholly owned subsidiary of Parent. If the Merger is completed, our ordinary shares will be removed from listing on The Nasdaq Stock Market LLC (“Nasdaq”) and deregistered under the Exchange Act and we will no longer file periodic reports with the SEC. Parent and Merger Sub are affiliates of Platinum Equity, LLC ("Platinum") and affiliates of Solenis LLC, which is a portfolio company of Platinum. Pursuant to the Merger, each ordinary share issued and outstanding immediately prior to the effective time of the Merger (other than (i) ordinary shares held by the Company, Parent, Merger Sub or any direct or indirect wholly owned subsidiary of Parent or Merger Sub, (ii) ordinary shares to which the holder has validly exercised and perfected and not effectively withdrawn or lost their rights to dissent under the applicable provisions of the Companies Act (2023 Revision) of the Cayman Islands, and (iii) ordinary shares held by BCPE Diamond Investor, LP ("BCPE"), our controlling shareholder and an entity advised by Bain Capital Private Equity, LP) will be cancelled and exchanged at the effective time of the Merger into the right to receive merger consideration of $8.40 in cash without interest and subject to any applicable withholding taxes. Ordinary shares held by BCPE, other than the Rollover Shares (as defined below), will be cancelled and exchanged at the effective time of the Merger into the right to receive merger consideration of $7.84 in cash without interest and subject to any applicable withholding taxes.

On March 8, 2023, concurrently with the execution of the Merger Agreement, BCPE separately entered into the Rollover Contribution Agreement with Olympus Water Holdings I, L.P., a Cayman Islands exempted limited partnership (“Topco”), an affiliate of Platinum and, following the consummation of the Merger, our indirect parent, pursuant to which BCPE has agreed to contribute, transfer and assign all of its right, title and interest in certain of its ordinary shares (the “Rollover Shares”) to Topco (and in certain circumstances, a subsidiary of Topco) (such Rollover Shares being valued at $7.84 per ordinary share), and Topco has agreed to concurrently accept (or if applicable, cause its subsidiary to accept) such Rollover Shares in exchange for the issuance to BCPE of certain common and preferred units of Topco, or in certain circumstances, common units of Topco and preferred interests of a subsidiary of Topco.

The respective obligations of each party to effect the Merger is subject to the satisfaction (or waiver, where permissible pursuant to applicable law) of certain conditions, including receipt of the affirmative vote of holders of ordinary shares representing the affirmative vote of at least two-thirds of the votes cast by the holders of ordinary shares present and voting in person or by proxy at the extraordinary general meeting (the “Requisite Shareholder Approval”), the expiration of waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and certain other specified regulatory approvals and other customary closing conditions. Subject to the satisfaction (or, if applicable, waiver) of such conditions, the Merger is expected to close in the second half of 2023.

We have agreed to pay Parent $92,000,000 in cash upon the termination of the Merger Agreement under certain circumstances. Parent has agreed to pay us $125,000,000 in cash upon the termination of the Merger Agreement under certain other circumstances.

Tax Receivable Agreement and TRA Termination Agreement

We previously entered into a tax receivable agreement (the “TRA”) with the previous owners of the Company and certain other members of management (the “TRA Recipients”). The TRA requires us to make payments to the TRA Recipients for 85% of the tax benefits realized by us when utilizing certain U.S. and Dutch income tax attributes generated, or owned by, or attributable to, us on or prior to the date of our initial public offering, and any tax deductions available to us that relate to the transaction expenses incurred by us as a result of the consummation of the initial public offering. We expect to utilize a significant portion of these income tax attributes based on current projections of taxable income, and therefore, expect to realize tax benefits. The annual tax benefits are computed by calculating the income taxes due, including such tax benefits, and the income taxes due without such tax benefits. Under the TRA, generally, we will retain the benefit of the remaining 15% of the applicable tax savings. Our liability under the TRA on an undiscounted basis was $200.4 million and $204.5 million as of March 31, 2023 and December 31, 2022, respectively, of which $1.4 million and $1.6 million is presented within Other current liabilities, and $199.0 million and $202.9 million is presented within Other non-current liabilities on the Condensed Consolidated Balance Sheet, as of March 31, 2023 and December 31, 2022, respectively.

Concurrently with the execution of the Merger Agreement, we, Diversey Holdings I (UK) Limited, a private limited company organized in England and Wales, and BCPE Diamond Cayman Holding Limited, a Cayman Islands exempted corporation, entered into the Tax Receivable Termination Agreement (the "TRA Termination Agreement"), pursuant to which, among other things, the parties agreed to terminate the TRA, with such termination effective upon the consummation of the Merger. From and after the effective date of the TRA Termination Agreement, no payments will be made to any person in respect of, or pursuant to, the TRA.

Nature of Operations

We are a leading global provider of high performance hygiene, infection prevention, and cleaning solutions for the Institutional and Food & Beverage markets. In addition, we offer a wide range of value added services, including food safety and application training and consulting, as well as auditing of hygiene and water management. Our Institutional business provides solutions serving end-users such as healthcare facilities, food service providers, retail and grocery outlets, educational institutions, hospitality establishments, and building service contractors. Our Food & Beverage business provides solutions serving manufacturers in the brewing, beverage, dairy, processed foods, pharmaceutical, and agricultural markets. Although our cleaning products represent only a small portion of our customers’ total cleaning costs, they are typically viewed as being non-discretionary because they can have a meaningful impact on the efficacy of food safety, operational excellence, and sustainability. The COVID-19 pandemic further reinforced the essential nature of our solutions and increased hygiene, infection prevention, and cleaning standards across all markets.

The product range of Diversey®-branded solutions includes fully integrated lines of products and dispensing systems for hard surface cleaning, disinfecting and sanitizing, hand washing, deodorizing, mechanical and manual ware washing, hard surface and carpeted floor cleaning systems, cleaning tools and utensils, fabric care for professional laundry applications comprising detergents, stain removers, bleaches and a broad range of dispensing equipment for process control and management information systems. Floor care machines are commercialized under the well-established Taski® brand.

We are globally operated with manufacturing facilities, sales centers, administrative offices and warehouses located throughout the world, and we have a global team of approximately 9,000 employees as of March 31, 2023.

Basis of Presentation

Our Condensed Consolidated Financial Statements include all of the accounts of the Company and our subsidiaries. These Condensed Consolidated Financial Statements reflect our financial position, results of operations, cash flows

and changes in stockholders' equity in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). All intercompany accounts and transactions have been eliminated. All amounts are in US Dollar denominated millions, except per share amounts and unless otherwise noted, and are approximate due to rounding.

The accompanying unaudited financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete annual financial statements. In the opinion of management, the accompanying unaudited financial statements include all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation. Interim results are not necessarily indicative of the results that may be expected for the full year. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements of the Company and notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K.